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Calculation of interest on your loan8/17/2009 10:48:31 AM Bank of England Base Rate The bank of england reviews the base rate and provides a benchmark that most banks or building societies factor in to their interest rate settings.The banks and building societies do not have to follow these benchmarks, for instance if the bank of england base rate falls to 0.1 percent it doesn’t mean that your bank or building society has an obligation to also drop the interest on your secured loan to 0.1 percent. LIBOR This stands for London-Inter-Bank Offered Rate.It is the rate at which banks building societies and other financial institutions lend to one another.This governs how willing banks are to lend to people who want to borrow money, therefore it can have an effect on your interest rate.If the LIBOR is high, banks, building societies and other financial providers will be more likely to increase the interest rate to compensate for this, as it is costing those more and they would otherwise make less profit for themselves. Credit Score When you apply for a loan one of the first things a bank, building society or financial institution will do is gather information about you from credit reference agencies to see what kind of borrower you are.If you are believed to be a high risk borrower you are more likely to be offered a higher interest rate.This is because the bank, building society or financial institution is less prepared to trust you to pay the money back on time or even at all. Written by Samantha Peppercorn of Secured Loans |